Christchurch, New Zealand is rebuilding after a devastating earthquake two years ago and recovering from the global financial crisis -- and it could be losing more than US$1.2 billion to fraud. Of 140 businesses surveyed there, 38 percent had no distinct procedures to combat fraud, Chicago-based forensic analyst firm KPMG stated Monday.
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| Fraud costs companies US$3.5 trillion worldwide each year, according to the ACFE. |
Companies around the world lose US$3.5 trillion to fraud each year, according to a report by the Association of Certified Fraud Examiners last year. More than one-fifth of cases in the study lost at least US$1 million to fraud, and the average loss of revenue per organization is 5 percent annually.
India’s Serious Fraud Investigation Office (SFIO) will soon release a report about “alleged financial irregularities” with sporting outfitter Reebok, The Hindu Business Line noted Monday. And SIFO announced last week its intention to develop an early warning fraud detection system, which the agency hopes to deploy by June.
Organizations that want to combat fraud need not wait until the summer for a solution. SAP announced Tuesday a new analytic application to help enterprises detect, investigate, analyze and prevent fraud in Big Data environments. Companies across many industries can use SAP Fraud Management to:
- Identify fraud sooner than ever: Real-time detection integrates capabilities into business systems and alerts users to suspicious activity, leading to reduced financial loss.
- Improve detection accuracy: Real-time calibration and simulations on large volumes of data minimize false positives.
- Prevent and deter fraud situations: Rules and predictive methods can help users optimize their analysis, adapting measures to deceptive patterns and better preventing fraud.
Outmaneuvering Tax Evasion
The SAP HANA platform powers Fraud Management, which is part of the company’s solutions portfolio for governance, risk management and compliance (GRC). So SAP understandably chose to announce the new analytic application at GRC 2013 in Las Vegas this week.
Corporate fraud includes “activities undertaken by an individual or company that are ... designed to give an [illegal] advantage to the perpetrating individual or company,” according to Investopedia. “Corporate fraud schemes ... are marked by their complexity and economic impact on the business.”
That includes the business of government, as tax evasion and social services fraud exacerbate budget deficits. SAP Fraud Management users can cross-check tax returns and social service applications against millions of related data records in real-time, and SAP HANA’s predictive algorithms can uncover hidden fraud patterns that conventional tools might have missed.
High Cost of Fraud
“Corporate fraud can be difficult to prevent and to catch,” as Investopedia noted. “By creating effective policies, a system of checks and balances and physical security, a company may limit the extent to which fraud can take place.”
Fraudulent insurance claims and associated costs are at historical highs, showcasing the weaknesses of traditional fraud detection methods and their low recovery rates. SAP Fraud Management for Insurance can help insurance companies automate detection, improve investigations and avoid paying illegitimate claims.
Cynics might say that stopping fraudsters is just about keeping money in the hands of power.
But it can safeguard a company’s reputation. Just ask the board of directors at Reebok.
And it can save taxpayers money. The citizens of Christchurch can surely tell you how their lost money could have better been spent.
Related Media:
“Report to the Nations On Occupational Fraud and Abuse” by the Association of Certified Fraud Examiners
“Rebuild fraud could top $1.5 billion” on TV3
“SFIO finalising report into alleged fraud at Reebok” in The Hindu Business Line
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